Allergan Plc’s deal with a Native American tribe could potentially face scrutiny from U.S. Congress

In a huge blow to generic drug makers, Allergan Plc has transferred its parent rights to a Native American tribe, which is treated as a sovereign nation in U.S. law, in order to shield its patents from civil lawsuits.

In a landmark deal that could potentially strike a significant blow to generic medicines, Allergan Plc has struck a deal with a Native American tribe that essentially shields the company’s patents in administrative proceedings and could be used to protect them from challenges in federal court, said legal experts.

On Friday, Allergan had stated it had transferred patents the patent rights for its dry eye medicine, Restasis, to the St. Regis Mohawk Tribe, who will exclusively license the patents back to the company in exchange for ongoing payments.

The deal capitalizes on the fact that the St. Regis Mohawk Tribe is treated as a sovereign nation and is immune to civil lawsuits.

With the announcement of this deal, Allergan has stated, it believes that Restasis patents will no longer be subject to review by the U.S. Patent Trial and Appeal Board, which is an administrative court empowered to cancel patents through a process called inter partes review.

Allergan said, it would not claim immunity in an ongoing lawsuit in federal court by generic manufacturers seeking to revoke the same patents.

“This was directed at and only affects the flawed IPR process,” said Brenton Saunders, Allergan’s Chief Executive in an interview.

However, judges across the United States are of the opinion that tribal immunity applies to litigation in federal court. This means that companies which manufacture generic drugs will now not have enough motivation to follow Allergen’s example of transferring their rights to the natives tribes, thus severely limiting their ability to challenge those patents.

Drugs manufactured by companies, including, Pfizer Inc, Allergan, and Merck & Co are usually protected by patents laws for up to 20 years after their introduction to the market. Their generic equivalent can however be released in the market earlier if they generic drug makers can successfully sue to have those patents invalidated.

There is a gigantic difference in prices between the prices of generic drugs from those made by Allergen, Pfizer and the likes. The sales of Restasis alone were $1.4 billion in 2016.

The Patent Trial and Appeal Board which was created by the Congress in 2011 to ease, simplify and make the process of challenging drug patents more cost effective, have been widely embraced by generic drug companies.

Earlier this year, the Patent Trial and Appeal Board had invalidated a few patents held by Abbvie Inc on its $16 billion immunosuppressant Humira, thus raising the possibility of low-cost equivalents for the country’s best-selling drug.

Allergen’s deal has squished this entire process.

Generic drug makers, including Teva Pharmaceuticals Inc. are suing Allergan in federal court with the prayer that Restasis patents should not have been granted in the first place because they cover obvious concepts.

As per Michael Carrier, a law professor from Rutgers Law School, drug companies may fear a public outcry if they use tribal immunity to remove their patents from scrutiny by both the board and federal court.

A jump in drug prices could lead to Congress passing a law limiting the scope of that immunity in such cases.

According to Saunders, it is unlikely that the drug industry will try shield its patents from litigation in federal court.

“I’d be very cautious about creating this parade of horribles,” said Carrier.

However Rachel Sachs, a patent law professor at Washington University in St. Louis, said it was likely only a matter of time.

“Once the industry begins engaging in a practice, even at a low level … there are actors who will take it to its logical extreme,” she said.